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Debtors Collection Period - Formula
Fomula is given below:
Debtors collection period = 365/ Debtors turnover
Or (365 x Average debtors)/ Annual credit sales
This refers to credit duration that was granted to the debtors on the duration within that they were imaginary to pay their dues to the firm.
The shorter the collection period/credit duration the higher the debtors turnover and vice versa. If no opening debtors are provided requires the closing debtors to represent average debtors.
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